Case Study: Financial Statements Assignment
School of Business, Liberty University
BUSI: 532: Advanced Financial Statement Analysis
Dr. Debra Touhey
August 24, 2025
When answering the first five questions of the case study on Bertha’s Bridal Boutique, I
inserted the financial information given in the textbook into an excel spreadsheet, so it was
simple to cross reference and connect cells. The first question was: calculate the cash collected
during 20X1 from accounts receivable. This answer was found from taking beginning accounts
receivables in 20X0, adding net credit sales, and then subtracting ending accounts receivables in
20X1. Bertha’s Bridal Boutique collected $7,133,000 cash in 20X1 from accounts receivables.
The second question was: calculate the cash payments during 20X1 on accounts payable
to suppliers. For the first part of this question, I had to calculate net purchases through ending
and beginning inventory and cost of goods sold. Once net purchases were calculated it could be
added to beginning accounts payable to then calculate the cash payment during 20X1. Cash
payments during 20X1 on accounts payable to suppliers totaled to $ 4,485,000.
The third question was: calculate the cash provided from operations for 20X1. This was
calculated through using net income and adding together the changes in assets and liabilities.
The total cash provided from operations for 20X1 was $323,000.
The fourth question was: calculate the cash inflows during 20X1 from financing activities.
The payment of dividends during 20X1 had to first be figured out using retained earnings, net
income, and dividends payable. Once the payment of dividends was calculated, it could be used
to figure out the cash flow from financing activities. Bertha’s Bridal Boutique cash inflows from
financing activities during 20X1 was $700,000.
The fifth question was: calculate the cash outflows from investing activities during 20X1.
This was calculated by adding together purchases of long-term investments and purchases of
property, plant and equipment. When adding those two items, cash used in investing activities
during 20X1 was $ (937,000).
When analyzing Bertha’s Bridal Boutique financial statements, the first thing I looked at
was the balance sheet and the current ratio as it is their ability to pay off their short-term
obligations. The current ratio was 3.02. While a current ratio over 1 is ideal, a current ratio over
3 can indicate that the company isn’t effectively managing their funds (Kibet, 2024). Secondly, I
looked at the company’s debt to equity ratio which equaled 0.62. An unhealthy debt to equity
ratio is anything above 2, so 0.62 means the company is less risky as they don’t rely on debt to
meet their obligations. Bertha’s Bridal Boutiques’ return on assets was 16.76 % which is
excellent. This ratio shows that the company effectively uses its assets to generate profit. When
looking at the company’s income statement, their net credit sales were up 10% from 20X0 to
20X1. This is a positive for the company as it means their revenue is growing and there is a
demand for the company’s products. The companies gross profit margin for 20X1 was 40%
which indicates efficient operations. When looking at Bertha’s Bridal Boutiques’ net profit
margin, it came to be 7%. For a bridal boutique, this net profit margin is very low, an ideal net
profit margin should be above 10% and excellent net profit margin should be above 20% (Loth,
2023). Overall, when looking at the financial statements of Bertha’s Bridal Boutique, the
company is in a good position moving forward. Ideally, they need to raise their net profit margin
to sit above the 10% range.
References
Kibet, L. (2024, October 11). Understanding the current ratio. Business
Insider. https://www.businessinsider.com/personal-finance/investing/current-ratio
Loth, R. (2023, May 20). How to Evaluate a Company's Balance Sheet.
Investopedia. https://www.investopedia.com/articles/basics/06/assetperformance.asp
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